Is Tariff Dodging Worth the Cost?

As tariffs mount on exports between China and the U.S., and as Brexit evolves, a risky trend of tariff dodging has emerged, garnering attention from enforcement authorities. The potential for short-term savings has enticed some companies to alter the declared country of origin on their products or misclassify goods, but these illegal activities can have significant consequences, especially as governments increasingly assign personal liability to individuals acting on behalf of a corporation.

Historically, customs authorities relied on spot-checks to identify tariff-dodging activities. More recently, these organizations have been adopting artificial and business intelligence strategies to evaluate massive data sets for inconsistencies in submitted customs declarations. As a result of system improvements, in the last reported fiscal year, there were 243 seizures of unsafe imported products by the Commercial Targeting and Analysis Center (CTAC) with an appraised domestic value of more than 3.8 billion U.S. dollars. There were also monetary penalties totaling over 253.6 million U.S. dollars collected due to violations of U.S. trade laws, including the prohibition on the entry of items made using forced labor, and Antidumping and Countervailing Duties.

Importing mislabeled product can also result in business continuity disruptions. When imports are stopped at the border, manufacturing can be halted until the assets are released, if they are not seized indefinitely. If a supplier’s imports are repeatedly delayed or confiscated due to customs violations, confidence in that supplier will drop and manufacturers may have to seek out a new vendor to replace them.

As countries become increasingly stringent in enforcing their import laws, executives and business leaders are being held accountable for lines of business that are found guilty of unethical import practices. Being unaware of trade regulations cannot be used as a defense.

Executives are increasingly being held personally accountable for business practices that violate trade regulations.

To avoid non-compliance with import regulations and tariffs, products must be labeled consistently and in compliance with the codes found in the World Customs Organization’s Harmonized Commodity Description and Coding System. In the United States, this means Harmonized Tariff Schedule (HTS) codes must align with the product listed in the U.S. International Trade Commission’s database. Part of this involves communicating with suppliers to ensure all relevant parts are properly and consistently labeled — customs authorities look for inconsistency when deciding which shipments to audit. Importers must then identify the tariffs and regulations applicable to those products, based on their country of origin.

Providing consistent and accurate documentation, and paying the appropriate tariffs, enables companies to get their assets through customs quickly and cleanly, with no disruption to business continuity.

By surveying the supply chain to collect relevant U.S.-HTS and country of origin data, Assent’s clients are prepared to handle shifts in international trade and can face uncertainty with confidence. To learn more about how Assent can help you, contact info@assentcompliance.com.

General Counsel - Travis is an international trade and compliance attorney who specializes in ITAR/EAR/sanctions, global anti-corruption and anti-slavery, codes of conduct, environmental health and safety, product stewardship and corporate social responsibility.